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CP Rail proxy fight: It won’t be a slam dunk, cautions Ackman

CP Rail proxy fight combatant Bill Ackman of Pershing Square says even if CP Rail called to make a deal now, he’d say see you at the AGM vote next week.

CP Rail proxy fighter Bill Ackman of Pershing Square Capital Management says it's too late to make a deal with CP Rail - he'll see them at the vote May 17. (Pawel Dwulit / THE CANADIAN PRESS)

By Vanessa LuBusiness Reporter

Tues., May 8, 2012

As momentum builds for Pershing Square Capital Management’s proxy fight with CP Rail, activist investor Bill Ackman doesn’t see it as a slam dunk but he is certainly sounding confident.

“About 36 per cent of the votes have been cast,” Ackman told the Bloomberg Canada’s economic summit in Toronto on Tuesday, and of those “at least 95 per cent” have voted for Pershing’s slate of seven nominees that includes Ackman. Counted in that one-third of proxies are the ones belonging to Pershing Square, which is the largest CP shareholder 14.2 per cent.

“I wouldn’t say anything is a slam dunk until it’s done,” Ackman said, but the proxy advisory firm ISS recommended last week that shareholders support Ackman. CP has criticized ISS’s analysis, saying it didn’t take into account the company’s ongoing multi-year plan.

Ontario Teachers’ Pension Plan said Monday it is backing Pershing and withholding votes for the board’s current 15 directors that CP has put forward for re-election at next week’s annual meeting.

When asked if CP chair John Cleghorn suddenly called up to offer up a compromise, Ackman said his response would be simple.

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“I would say I look forward to seeing you at the May 17 shareholder meeting,” Ackman said.

He told reporters later that he has had no conversations with CP officials since early in the year.

“I think it needs to go to a vote,” he said because it would send a strong message and mandate. “I don’t think it’s our job to decide on behalf of all the shareholders which directors are appointed. Nor do I think it’s the current board’s job to decide which directors stay, which go.”

Pershing wants to see the current CEO Fred Green ousted, and replaced with Hunter Harrison, who is credited with turning around rival CN Rail.

But CP’s board of directors, led by Cleghorn, is standing behind Green and has argued installing Harrison at the helm would hurt the railroad’s long-term plan to improve efficiency and profitability.

In a statement, CP said Tuesday that it is still urging shareholders to cast their votes for the 16 directors put forward by management and not support Pershing’s slate.

“A vote for seven Pershing Square nominees is a vote for risk and disruption,” it said.

Ackman argues that CP needs immediate management change, and if the full board, after an executive search, recommends someone other than Harrison, he would support that.

He told the Bloomberg summit that he would have preferred to work with the board to bring about change, but was forced to launch the proxy contest, which he says will cost Pershing between $10 million and $15 million.

Ackman added it was tough to find directors willing to run for the Pershing slate, because many top Canadian business leaders were not keen to go up against the establishment, some of whom serve currently on the board.

“We had to go to people who were more entrepreneurial,” he said.

Other institutional investors quietly urged Pershing on in its push for change, Ackman said, but “people were generally afraid to speak up,” noting some funds like ETFs or index funds cannot take an active role.

While he is not saying which CP directors he would like to see stay on, Ackman praised the proxy advisory firm ISS’s recommendations. Its report last week backed Ackman’s slate as well as several current directors, but it did not support Cleghorn or Green.

“We will work with whoever we have,” he said. “And I think those directors will be happy they kept their seats, and they will understand they are there on behalf of all of the shareholders.”

And if they don’t do what shareholders want?

“Then we will call a special meeting and replace them,” Ackman told reporters.

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